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EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT is made as of this 30th day of March, 2000 by
and among Netguru, Inc., Delaware corporation (the "Company"), and Elliott
Associates, L.P., a Delaware limited partnership ("Elliott") and Westgate
International, L.P, a Cayman Islands limited partnership ("Westgate" and,
collectively with Elliott, the "Investor").
W I T N E S S E T H
WHEREAS, the Investor is the beneficial owner of 12,000 shares of the
Company's Series A Cumulative Convertible Preferred Stock, par value $.01 (all
of such shares being the "Series A Shares"), having the rights, designations and
preferences set forth in that certain Certificate of Designations of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof of the
Series A Cumulative Convertible Preferred Stock for Netguru, Inc. dated March 8,
2000 (the "Series A CD"); and
WHEREAS, the Investor wishes to arrange for the exchange of all of its
Series A Shares for an equal number of shares of a newly created series of
preferred stock designated Series B Cumulative Convertible Preferred Stock, par
value $.01 (all of such shares being the "Series B Shares"), having the rights,
designations and preferences set forth in the Company's Certificate of
Designations, Powers, Preferences and Relative, Participating, Optional and
Other Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of the Series B Cumulative Convertible Preferred Stock for
Netguru, Inc. in the form attached hereto as EXHIBIT A (the "Series B CD");
WHEREAS, the execution and delivery of this Exchange Agreement by the
Company and the Investor and the transactions contemplated hereby are being made
in reliance upon the provisions of Section 3(a)(9) of the Securities Act of
1933, as amended;
NOW THEREFORE, in consideration of the mutual covenants set forth in
this Exchange Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. EXCHANGE TRANSACTIONS.
(a) The Investor and the Company hereby agree to the exchange
of the Series A Shares for the Series B Shares. The closing of such
exchange (the "Exchange Closing") shall take place at the offices of
Kleinberg, Kaplan, Wolff & Cohen, P.C. on April 3, 2000 at 10 a.m., or
as may otherwise be mutually agreed to by the Investor and the Company.
(b) At the Exchange Closing, (i) the Investor shall deliver
its Series A Shares to the Company for cancellation and (ii) the
Company shall deliver to the Investor (x) the Series B Shares, in the
denominations as the Investor shall request and in the name of Elliott
or Westgate as the Investor shall request and (y) evidence of the
filing of the Series B CD with the Secretary of State of the State of
Delaware.
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(c) At the Exchange Closing, (i) the Series A Shares shall be
deemed to be cancelled, (ii) the Series B Shares shall be deemed to be
owned by the Investor, and (iii) the Company shall deliver to the
Investor a certificate or certificates representing the Series B
Shares. The Company hereby agrees not to issue any Series A Shares in
the future. For clarification purposes, the foregoing sentence does not
prohibit the Company from issuing other shares of preferred stock
(including without limitation a new class or series designated as
"Series A") which would otherwise be permitted pursuant to the terms of
the Series B CD, the Purchase Agreement (as defined in Section 2 below)
and any other agreement contemplated thereby.
2. REFERENCES. Upon the Exchange Closing, all references to the Series
A Cumulative Convertible Preferred Stock, Preferred Shares and the Certificate
contained in the Securities Purchase Agreement dated as of March 8, 2000 between
the Company and the Investor (the "Purchase Agreement") and the Registrations
Rights Agreement referred to therein of even date (the "Registration Rights
Agreement") shall be deemed to henceforth refer to the Series B Cumulative
Convertible Preferred Stock, Series B Shares and the Series B CD, respectively,
for all purposes other than in connection with the Escrow Agreement referred to
in the Purchase Agreement dated as of March 8, 2000. As of the Exchange Closing,
all references to the Warrants contained in the Purchase Agreement, the
Registration Rights Agreement and the Series B CD shall be deemed to refer to
the new Warrants delivered pursuant to Section 3 hereof.
3. WARRANTS. In exchange for the Warrants issued to Elliott, Westgate
and Shoreline Pacific Institutional Finance ("Shoreline") on March 8, 2000 in
connection with the Purchase Agreement (the "Warrants"), the Company agrees to
provide Elliott, Westgate and Shoreline with new Warrants at the Exchange
Closing which shall be identical to the Warrants in all respects except that the
"Exercise Price" thereunder shall be $28.50 (as adjusted from time to time
pursuant to the terms of the Warrants).
4. REPRESENTATIONS OF THE INVESTOR. The Investor hereby represents and
warrants to the Company as follows:
(a) REPRESENTATIONS CONTAINED IN THE PURCHASE AGREEMENT. The
representations and warranties of the Investor contained in the
Purchase Agreement are true and correct as of the date when made and as
of the date hereof as though made on this date.
(b) AUTHORITY. The execution and delivery by the Investor of
this Exchange Agreement, and the performance by the Investor of its
obligations hereunder, have been duly and validly authorized by the
Investor, with no other action on the part of the Investor or its
partners being necessary. This Exchange Agreement has been duly and
validly executed and delivered by the Investor and constitutes a legal,
valid and binding obligation of the Investor enforceable against the
Investor in accordance with its terms.
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(c) OWNERSHIP OF SERIES A SHARES. Assuming the accuracy of the
Company's representations and warranties contained in the Purchase
Agreement, the Investor is the owner of the Series A Shares and the
Series A Shares are free and clear of all liens. Assuming the accuracy
of the Company's representations and warranties contained in the
Purchase Agreement, the delivery of Series A Shares as contemplated by
this Exchange Agreement in the manner provided herein will transfer to
the Company good and valid title to the Series A Shares, free and clear
of all liens and encumbrances (except for those created by the Company)
whatsoever.
(d) NO CONFLICTS. Neither the execution and delivery by the
Investor of this Exchange Agreement, nor the performance by the
Investor of its obligations under this Exchange Agreement and the
consummation of the transactions contemplated hereby, will conflict
with or result in a violation or breach of: (i) any of the terms,
conditions or provisions of the partnership agreement of the Investor;
(ii) any terms, conditions or provisions of any material agreement or
instrument to which the Investor is a party; or (iii) any law, rule,
regulation or judgment applicable to the Investor.
5. REPRESENTATIONS OF THE COMPANY. the Company hereby represents and
warrants to the Investor as follows:
(a) REPRESENTATIONS CONTAINED IN THE PURCHASE AGREEMENT. The
representations and warranties of the Company contained in the Purchase
Agreement are true and correct as of the date when made and as of the
date hereof as though made on this date, except that the Company's
representations regarding its capitalization may no longer be true and
correct prior to the Exchange Closing to the extent that the Series A
Shares are issued and outstanding and the Series B Shares have been
designated pursuant to the Series B CD and certain outstanding options
have been exercised.
(b) AUTHORITY. The execution and delivery by the Company of
this Exchange Agreement and the performance by the Company of its
obligations hereunder, have been duly and validly authorized by the
board of directors of the Company, with no other corporate action on
the part of the Company or its stockholders being necessary. This
Exchange Agreement has been duly and validly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms.
(c) SHARES AVAILABLE. The Company has authorized, has
designated and has available for issue, the Series B Shares necessary
to effect the exchange transactions referred to in Section 1 above.
(d) OWNERSHIP OF SERIES B SHARES. The delivery of a stock
certificate or certificates representing the Series B Shares in the
manner provided herein will transfer to the Investor good and valid
title to the Series B Shares, free and clear of all liens and
encumbrances (except for those created by the Investor) and all Series
B Shares will be duly and validly issued and fully paid and
nonassessable.
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(e) NO CONFLICTS. Neither the execution and delivery by the
Company of this Exchange Agreement, nor the performance by the Company
of its obligations under this Exchange Agreement and the consummation
of the transactions contemplated hereby, will conflict with or result
in a violation or breach of any of the (i) the terms, conditions or
provisions of the Charter or By-Laws of the Company; (ii) the terms,
conditions or provisions of the material agreements or instruments to
which the Company or any of its subsidiaries is a party or is bound; or
(iii) any applicable law, rule, regulation or judgment.
(f) FILING OF THE SERIES B CD. The Company hereby represents
that it has filed the Series B CD with the Secretary of State of the
State of Delaware on the date hereof, knows of no reason why the Series
B CD shall not be accepted by such Secretary of State for filing and
agrees to provide the Investor with evidence of such filing on the
first business day following the date of filing.
6. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE INVESTOR. The
obligation hereunder of the Investor to exchange its Series A Shares for the
Series B Shares is subject to the satisfaction, at or before the Exchange
Closing, of each of the conditions set forth below. These conditions are for the
Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion.
(a) Assuming the reference changes to be made pursuant to
Section 2 hereof, the representations and warranties of the Company
shall be true and correct as of the date of the Exchange Closing as
though made at that time.
(b) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(c) At or prior to the Exchange Closing, the Investor shall
have received an opinion of counsel to the Company in the form attached
hereto as EXHIBIT B. The opinion shall include, in substance, those
opinions set forth in paragraphs #2, #5, #6 and #7 of the opinion
letter presented to Investor by Rutan & Tucker, LLP on March 8, 2000
with respect to this Exchange Agreement and those opinions set forth in
paragraphs #4 and #8 thereof with respect to the Series B Shares.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligation hereunder of the Company to exchange its Series B Shares for the
Series A Shares as set forth herein is subject to the satisfaction, at or before
the Exchange Closing, of each of the conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) Assuming the reference changes to be made pursuant to
Section 2 hereof, the representations and warranties of the Investor
shall be true and correct as of the date of the Exchange Closing as
though made at that time.
(b) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
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8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE INVESTOR. The Investor agrees to
indemnify and hold harmless the Company, its officers, directors and
stockholders and any other person who may be deemed to control the
Company from any loss, liability, claim, damage or expense arising out
of the inaccuracy of any of the Investor's above representations,
warranties or statements or the breach of the agreements contained
herein.
(b) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Investor, its partners, employees and
agents and any person who may be deemed to control the Investor from
any loss, liability, claim, damage or expense arising out of the
inaccuracy of any of the Company above representations, warranties or
statements or the breach of the agreements contained herein.
9. MISCELLANEOUS.
(a) FULL FORCE AND EFFECT. Except as otherwise expressly
provided herein, each of the Purchase Agreement, the Registration
Rights Agreement, the Warrants and the other agreements and
transactions contemplated thereby shall remain in full force and
effect.
(b) CONSENT TO JURISDICTION ETC. Each of the Company and the
Investor agree that any legal action or proceeding relating to or
arising out of or under this Exchange Agreement may be brought in the
state or federal courts in the State of New York, and each party
accepts with regard to any such action or proceeding for itself and in
respect to its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each party further irrevocably
consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies
thereof by registered or certified U.S. mail, postage prepaid, to it at
its addresses provided in Section 9(f) hereof, such service to become
effective upon receipt or five (5) days after such mailing, whichever
shall first occur. To the fullest extent permitted by applicable law,
each party hereby waives, and agrees not to assert, by way of motion,
defense, counterclaim or otherwise, in any such suit, action or
proceeding any claim that (i) it is not personally subject to the
jurisdiction of any of the above-named courts by reason of any immunity
or otherwise, (ii) its properties are exempt or immune from setoff,
execution or attachment, either prior to judgment or in aid of
execution or (iii) any suit, action or proceeding so brought is in an
inconvenient forum or that the venue of the suit, action or proceeding
is improper or that the subject matter hereof may not be enforced in or
by such courts.
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(c) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties set forth herein shall
survive the issuance of the Series B Shares pursuant to this Exchange
Agreement.
(d) EXPENSES. Each party will pay its own costs and expenses
incurred in connection with the negotiation, execution and closing of
this Exchange Agreement and the transactions contemplated hereby.
(e) GOVERNING LAW. This Exchange Agreement shall be governed
by and construed in accordance with the internal laws of the State of
New York.
(f) NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given
only if delivered personally, by courier or by facsimile transmission
or mailed (first class postage prepaid) to the parties at the addresses
or facsimile numbers set forth in the Purchase Agreement.
(g) COUNTERPARTS. This Exchange Agreement may be executed in
any number of counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same instrument.
*** SIGNATURES APPEAR ON THE NEXT PAGE***
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IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be fully executed as of the 30th day of March, 2000.
NETGURU, INC.
By: /s/ Jyotti Chatterjee
---------------------------------
Name: Jyotti Chatterjee
Title: President
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul E. Singer
--------------------------------
Name: Paul E. Singer
Title: General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, L.P.
Attorney-in-Fact
By: /s/ Paul E. Singer
--------------------------------
Name: Paul E. Singer
Title: President
FOR PURPOSES OF SECTION 3 HEREOF ONLY:
SHORELINE PACIFIC INSTITUTIONAL FINANCE
By:
------------------------------
Name:
Title:
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